Business Law Lawyers in Northern Kentucky

Providing Legal Support to Business Owners

Starting a business can give you more control over your time and work-life balance and allow you to pursue your passions. But it’s not an easy road. It’s common for businesses to operate in the red for the first few years, and there’s a lot of work that goes into formation and planning before you can get to the actual operation. A business lawyer can make this process easier by guiding you through the requirements and ensuring you understand your obligations as a business owner.

If you’re considering opening a business in the Covington, KY, area, contact the Law Offices of Shannon C. Smith, PLLC, to get legal counsel and representation for all of your business law needs. We have an established track record of helping owners with business formation, succession planning, and contract issues.

What Are the Different Types of Business Structures?

One of the most important decisions you’ll have to make when setting up your business is what type of structure you want to operate under. While it is possible to change this later on, it can be difficult, and it’s often easier to start how you wish to end. The most common types of business structures include:

•  Sole proprietorships: With this option, there is only one person who has sole ownership. Many small businesses operate as sole proprietorships because it’s the simplest to form, and taxes are filed under your regular tax return.
•  Limited liability corporations: LLCs offer more protection against lawsuits while still being simple to form and operate for small businesses.
•  General partnerships: A general partnership involves at least two owners. Profits and losses still go through the owners’ personal tax returns, but there is no protection from personal assets being taken in a lawsuit.
•  Limited partnerships: Limited partnerships work well when the partners want to have different levels of involvement in the business. Usually, the owners with the most control face the largest amount of liability as well.
•  C corp: This is one of the most common corporation structures. It legally separates the business from the owners for tax and liability purposes, but taxes are much more complex.
•  S corp: S corps are similar to C corps, but they have special tax status that can offer advantages to the shareholders.

If you’re not sure what business structure is the best choice for your organization, going over the pros and cons of each of these options with a business attorney can help you decide.

What Is Required to Register a Business in Kentucky?

It’s important to follow the rules laid out by the state of Kentucky to ensure that your business is registered appropriately and legally able to do business. What this entails can vary a bit depending on the type of business structure. Sole proprietorships and general partnerships should go through the County Clerk’s office, while the remaining structures need to register through the Secretary of State.

You will also need to get an employer identification number from the IRS. An EIN is like a Social Security number for your business and is required for tax and business purposes. Obtaining an EIN is a simple online process that takes just a few minutes. Kentucky also requires that businesses have a Commonwealth Business Identifier, which can be obtained through the Kentucky Business One Stop Portal.

Depending on the industry and type of business, you may need to complete other paperwork, such as paying the Motor Vehicle Usage Tax or applying for a purchase exemption. Some industries also have specific licenses that are required at the local, county, or state level. A business attorney can ensure that you’re aware of all of your legal obligations and have completed all the necessary steps to begin doing business.

What Are the Implications of Hiring Employees vs. Contractors?

As your business grows, you may need to hire others to help you run the day-to-day operations or specialize in certain areas, such as marketing. In general, you have the option of hiring an actual employee or working with someone on a contract basis/ Hiring an employee gives you more control over the person’s process and time commitment, but you’ll have to manage things like federal and state tax withholdings, workers’ compensation insurance, and required benefits.

Hiring someone as an independent contractor can simplify accounting, as you don’t have to worry about tax withholdings, but it also involves giving up some control. Independent contractors generally set their own rates and schedules, and interfering with this could create an employer-employee relationship. If there are issues with performance, you may also still be held to payment depending on the terms of the contract instead of being able to fire at will as you could with an employee.

What Does Business Succession Planning Involve?

Even if you’re still just in the beginning stages of business formation, it’s important to discuss a succession plan with your attorney. In the best case scenario, it ensures you have an exit plan for when you want to retire or pass on the business to someone else. In the worst, it ensures your business is able to continue to operate if something happens to you. Business succession planning involves identifying and training potential successors and ensuring that legal documents, such as trusts and buy-sell agreements, are in place to facilitate the transition if necessary.

If you have questions about establishing or growing a business, reach out to the team at the Law Offices of Shannon C. Smith, PLLC, by calling 859-667-1204. We can discuss your business goals and help you understand which formation option provides the most benefits for your specific situation and help you plan for the future of your company.